As companies finish their annual compensation talks and send out emails cementing pay for the next year, Payscale CFO Philip Watson wants CFOs to think about ways they can keep the conversation going.
Watson, who joined the Boston-based compensation software company last year, said he is seeing a shift toward “always on” compensation discussions and away from the set-it-and-forget it approach that still holds sway in many firms.
There are a few drivers behind the warming to the more iterative approach Watson believes companies should consider. Technology has put much more information in the hands of workers about how their salary and wages stack up to their counterparts. Watson also said younger Gen Z staff now entering the workforce are helping reshape discussions, bringing more of that information to the table as well as a willingness to be more transparent publicly about what they make.
“The people in the workforce now talk about it, they share it, right? And they post about it on social media…so the consequences of employers getting it wrong or making employees feel like they're not being paid fairly, those stakes are higher than they’ve been,” Watson told sister publication CFO Dive in an interview.
Laws have also aligned with the outlook of the digitally native generation’s impact on the workforce. During the past decade, pay transparency laws have gained a foothold nationwide, with their steady rollout making more pay decisions public across many U.S. states and cities, HR Dive reported.
Amid these changes, CFOs can work with their human resources counterparts to fashion a more thoughtful approach to conversations, using data to ensure their companies are signaling encouragement to top employees as well as giving underperforming employees an idea of what they might need to do better in order to earn more.
CFOs along with their HR counterparts can drive their company’s return on investment in their talent by using the “feedback loop” of pay as well as to make the best decisions about where they should be allocating scarce dollars in their workforce, he said.
Watson said exactly how often a company should alert their managers to talk to workers about pay would depend on the company. And he acknowledged it is not something that you always want to be discussing since that could be disruptive.
However, there are several situations where managers and workers should talk about pay and none of them are the annual review, according to a Payscale blog post. And in regularly scheduled comp conversations, managers can address how their direct reports’ current pay is aligned with performance and what would make them eligible for an increase.
“If you're waiting until the annual review to talk pay, you're waiting too long,” the report stated.
Meanwhile, CFOs and HR need to keep their eyes on the trends all year long, Watson said. They need to know what the new hot jobs are that might see pay increases and to decide on where they want their company’s pay levels to sit compared with the going rate for a given title.
“This is a newer way to think about compensation than people have traditionally thought about it in the past,” Watson said. “It’s going to be an evolution not a revolution.”
